Capitalizing on three metals that power green tech

Values-driven consumers are creating a groundswell of demand for products that reflect their interest in clean energy and sustainability. In fact, these buyers “now represent the largest segment (44%) of consumers” according to IBM.

Meeting this demand will mean dramatically increasing the manufacturing output of electric vehicles, solar panels, and other green tech all of which require specific metals. Consider, for example, that an electric car requires six times the mineral inputs of an ordinary car according to data from the International Energy Agency (IEA).

Consequently, the same body of research concludes that lithium, cobalt, and nickel will all experience a surge in demand over the next 17 years as clean energy technologies command more of the consumer’s dollars. 

This setting provides opportunities for investors who can increase their exposure to these materials via thematic ETFs.

Minerals used in electric cars compared to conventional cars

Lithium

Lithium is a soft metal used in electric vehicles. Additional research from the IEA forecasts that the clean technology industry demand for lithium could grow by 90% over the next two decades. This makes sense given that sales of EVs grew by 15% between 2018 and 2019 according to Deloitte. The majority of this growth comes from Europe (+93%) and China (+17%). 

Put simply, more than half of all passenger cars sold in the US will be electric by 2030 according to data from BloombergNEF. 

While EVs and batteries have become the largest consumers of lithium, the metal is also in high demand for other products. Examples include laptops, smartphones, solar energy storage, and medical equipment. This widespread demand helps explain why the price of lithium carbonate has increased by about ten times above 2020 prices according to Barron’s.

Investors should take note because it is clear that the already high demand for lithium will only grow over the coming years as more consumers opt for EVs. Moreover, a growing middle class population will also drive demand for electronic consumer products. McKinsey calculates that Li-ion batteries will post an annual compound growth rate of 30%.

Demand in thousand metric tons of lithium carbonate

Nickel

Data reported by Reuters shows that the amount of nickel deployed in new cars in the first half of 2022 increased by 50% compared to 2021. Nickel is a vital component in EVs and other green tech. Part of its utility comes from its strong resistance to corrosion which extends the life of green technologies while lowering maintenance costs. Moreover, nickel is highly recyclable which further bolsters it sustainability.

Today, the price of nickel is up about 44% from one year ago. This trend is likely to continue given that nickel has a wide range of practical applications. Nickel is found in hydroelectric tech where it contributes to the weldability of turbine blades. The metal also improves the strength of low alloy steels used in wind power equipment. And nickel-based alloys contribute to the useful life of thermal solar plants or concentrated solar power (CSP).

As recently as the second half of 2022 mining company Vale stated that they forecast global demand for nickel will increase by more than 40% by 2030. This projection illustrates why Goldman Sachs has stated that “nickel’s bull market is already here.” Importantly, the rising demand for nickel is a global trend as the US, China, Europe, and Japan have all seen a sharp uptick in demand since about 2020.

Cobalt

Cobalt plays a critical role in wind power because it is a component of the permanent magnets found in wind turbine generators. These magnets create a magnetic field without electrical input. This enables the turbines to operate at lower speeds while still producing energy. 

Wind power is expected to become a larger energy source in the coming years due, in part, to support from the US government. The Biden-Harris administration has created a plan to facilitate the production of floating offshore wind platforms. The goal is to power 10 million homes via offshore wind power within the next seven years.

Additionally, cobalt is necessary in renewable biogas technology which is a methane-based energy carrier. Renewable biogas is an alternative to natural gas and provides heat and delocalized electricity. Biogas technology degrades organic materials found in sewage and land fills. This process, which involves fermentation, improves with the addition of cobalt sulphate, cobalt chloride, cobalt carbonate, or cobalt acetate. 

Putting the Plan into Play

Investors who are interested in participating in the green tech revolution may want to consider some exposure to these three key metals. There are several ways to do so:

Lithium

LITU - Global X Lithium & Battery Tech UCITS ETF                        

XLON:BATT - L&G Battery Value-Chain UCITS ETF                       

W1TA - WisdomTree Battery Solutions UCITS ETF

Nickel

FAMAMW - FINECO AM MSCI WORLD METALS AND MINING UCITS ETF

PICK - iShares MSCI Global Metals & Mining Producers ETF

Cobalt

SXLB - SPDR S&P U.S. Materials Select Sector UCITS ETF 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Trackinsight. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. Advice from a finance professional is strongly recommended.